The sudden change in volatility and volume makes the possibility of a breakout very high and gives us a high chance of success. The best time to use the strategy is during the first 3 hours of the European session, after which volatility tends to disappear before rising again at the beginning of the US session.

SOME NOTES THE STRATEGY
  • To take full advantage of the volatility of the European session, traders should only trade major currency pairs like EUR / USD, GBP / USD.
  • H1 chart has proven to be the best time frame to use for this strategy as trading opportunities only exist for about 3 hours.
  • The only indicator used for this strategy is the 50-period simple moving average (SMA).
  • Make sure you are online at 2pm Vietnam, at that time you should look at the last 4 candlesticks (of H1 timeframe) and mark the highest and lowest among those 4 bars ( 4 hour period). This is the Asian trading range and we will buy/sell when the price breaks out of this range.
Buy Signal:
  • If the next candle breaks above the highs of the previous 4 candles and if the price is above the 50 SMA, it is a signal to buy the currency pair.
  • Place your stop loss below the low of the last 4 candles.
  • The take profit target is the height of the range, plus the breakout level.
Sell Signal:
  • If the price breaks below the lows of the range and the price falls below the 50 SMA it is a signal to initiate a sell trade.
  • Place your stop loss on the highs of the last 4 candles.
  • The take profit target is the height of the range, minus from the breakout level.

Chart GBPUSD H1

The above is an example of a sell order. The Asian session's trading range is highlighted with a blue rectangle. We will enter an order when the price exits the range according to the signals given above.

  • You should take-profit of half of the position at the target and let the other half run in case the move continues.
  • You can also use pending orders so that you don't need to constantly monitor price movements, and it will be almost like automated trading.
  • Only one trade per day should be made and all trades must be manually closed at the end of the day regardless of profit or loss.
  • In terms of risk management with the European session breakout strategy, it's best not to risk more than 1% - 2% of your account.
  • Some traders prefer to use 3 previous candles over 4 previous candles. Both strategies give equally good results so it is up to you to experiment and decide which one is more suitable for you.

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